Congestion Management
Settlement Credits
December, 2002
Market Design Principles
• The price of energy at each time and place should
reflect the marginal cost of producing or not
consuming one more unit of energy (at that time
and place)
• Dispatchable market participants should be
compensated for the effects of constraints
2
Congestion
Occurs when physical capability of the
transmission system cannot meet market
requirements
3
Operating Profit
Operating Profit
• Operating Profit is the difference between
operating cost and revenue
• Market Rules written assuming participants
bid and offer based on marginal benefit/cost
• Marginal Cost - Cost of producing next MW
• Marginal Benefit - Benefit of consuming
next MW
5
OP = Revenue - Cost
Price ($/MWh)
30
25
MCP = 20
15
OP+
OP+
OP+
10
5
0
20
40
60
MQSI=60
Quantity (MW)
80
100
6
Skill Check

7
Skill Check
• Generator A offer:
• Load B bid:
• 0-20 MW $15
• 0-10 MW $1,000
• 21-30 MW $25
• 11-20 MW $500
• 31 - 40 MW $100
• 21-30 MW $20
Dispatched to 30 MW
Dispatched to 20 MW
If MCP is $30, what is the OP for
A and B?
8
Congestion Management
Settlement Credits
Congestion Management
Settlement Credit
• CMSC payments are based on the difference
between the Operating Profit that would result
from the Market Schedule and Operating Profit
resulting from the Dispatch Instruction
OP (MQSI) - OP (DQSI)
Where MQSI = Market Quantity Scheduled for Injection
DQSI = Dispatch Quantity Scheduled for Injection
10
Market Schedule
Generator 1
Load
100 MW
$15
190 MW
Generator 2
100 MW
$20
no
transmission
line limit
Generator 3
100 MW
$25
Requirement is
190 MW
Region 1
•
•
•
•
Gen 1: 100 MW
Gen 2: 90 MW
MCP $20
GEN 3: does not run
Region 2
11
Transmission Congestion
Generator 1
Load
100 MW
$15
190 MW
Generator 2
100 MW
$20
150 MW
transmission
line limit
Generator 3
100 MW
$25
Requirement is
190 MW
Region 1
•
•
•
•
Gen 1: 100 MW
Gen 2: 50 MW
Gen 3: 40 MW
MCP $20
Region 2
12
CMSC
For Generator 2 in this case:
MQSI = 90
DQSI = 50
Offer = $20
MCP = $20
CMSC = OP(MQSI) - OP(DQSI)
= (MCP-Offer) x MQSI - (MCP-Offer) x DQSI
= (20-20) x90 - (20-20) x 50
=0-0
= $0
13
CMSC
For Generator 3 in this case:
MQSI = 0
DQSI = 40
Offer = $25
MCP = $20
CMSC = OP(MQSI) - OP(DQSI)
= (MCP-Offer) x MQSI - (MCP-Offer) x DQSI
= (20-25) x 0 - (20-25) x 40
= 0 - (-$200)
= $200
14
Gen 1- Constrained Off
Generator 1
Load
95 MW limit
100 MW
$15
Generator 2
100 MW
$20
190 MW
150 MW
transmission
line limit
Generator 3
100 MW
$25
Requirement is
190 MW
Region 1
•
•
•
•
Gen 1: 95 MW
Gen 2: 55 MW
Gen 3: 40 MW
MCP $20
Region 2
15
Constrained Off Payment
Generator 1
•
•
•
•
Market Schedule: 100 MW
Dispatch : 95 MW
Offer: $15 /MWh
MCP: $20 /MWh
CMSC= OP(MQSI) - OP(DQSI)
= (MCP-Offer) x MQSI - (MCP-Offer) x DQSI
= (20-15) x 100 - (20-15) x 95
= $25
16
Gen 2 - Constrained Off
Generator 1
Load
95
MW
100 MW
$15
190 MW
Generator 2
100 MW
$20
100
MW
150 MW
transmission
line limit
Generator 3
100 MW
$25
Requirement is
190 MW
Region 1
•
•
•
•
Gen 1: 95 MW
Gen 2: 55 MW
Gen 3: 40 MW
MCP $20
Region 2
17
Constrained Off Payment
Generator 2
•
•
•
•
Market Schedule: 90 MW
Dispatch : 55 MW
Offer: $20 /MWh
MCP: $20 /MWh
CMSC= OP(MQSI) - OP(DQSI)
= (MCP-Offer) x MQSI - (MCP-Offer) x DQSI
= (20-20) x 90 - (20-20) x 55
= $0
18
Constrained On Payment
Generator 3
•
•
•
•
Market Schedule: 0
Dispatch : 40 MW
Offer: $25
MCP: $20 /MWh
CMSC= OP(MQSI) - OP(DQSI)
= (MCP-Offer) x MQSI - (MCP-Offer) x DQSI
= ($20-$25) x 0 - ($20-$25) x 40 MW
= $200
19
Constraint Payments
When Actual Quantity Different
than Dispatch Quantity
Gen 1- Constrained Off
Generator 1
Load
95 MW limit
100 MW
$15
Generator 2
100 MW
$20
190 MW
150 MW
transmission
line limit
Generator 3
100 MW
$25
Requirement is
190 MW
Region 1
•
•
•
•
Gen 1: 95 MW
Gen 2: 55 MW
Gen 3: 40 MW
MCP $20
Region 2
Actually produces 50 MW
21
Constraint Payments
MQSI = 0 MW, DQSI=40 MW, AQEI =50MW
MCP = $20 Offer = $25
CMSC = OP (MQSI) - MAX [OP (DQSI), OP (AQEI)]
= (20-25) x 0 - MAX [(20-25) x 40, (20-25) x 50]
= $0 - MAX [$-200, $-250]
= $-(-200)
= $200
22
CMSC for a Dispatchable Load
• Load may be dispatched off or on
• Any time constrained and unconstrained are
different, possibility exists for CMSC
23
CMSC for a Dispatchable Load
E.G.
• Load A bids for 100 MW at $2,000
• Market Clearing Price = $100
• Load A is dispatched to only 75 MW
• At a bid price of $2,000 Load A will be
scheduled by the unconstrained algorithm
for all 100 MW
24
CMSC for a Dispatchable Load
• Bid = $2,000 MCP = $100
• MQSI = 100 MW, DQSI = 75 MW
• CMSC = OP(MQSI) - OP(DQSI)
= ($2,000 - $100) x 100
- ($2,000 - $100) x 75)
= $1900 x 100 - $1900 x 75
= $47,500
• The lost Operating Profit is $47,500
25
Negative CMSC
• CMSC payments bring the participant back
to the market schedule operating profit
• Generally CMSC payments will be a top-up
to restore operating profit
• Sometimes the schedule would lead to lower
profit than dispatch instructions
26
CMSC
• CMSC payments bring the participant back
to the market schedule operating profit
• While CMSC can be negative, it is more
often a payment to participants
• The cost of CMSC is recovered from loads
based on their activity in the market
27